Monday, June 21, 2010Last Update: 9:46 AM PT

Hearing Today on Oil Firm's Challenge to Drilling Moratorium

By SABRINA CANFIELD

NEW ORLEANS (CN) - A federal judge today will hear arguments on an oil company's challenge of the 6-month ban on deepwater drilling in the Gulf of Mexico. In an amicus brief, Louisiana supports Hornbeck Offshore Services claim that all 33 oil rigs affected by Interior Secretary Ken Salazar's moratorium had "previously satisfied the rigors" of the Minerals Management Service's permitting process. Hornbeck and the state say the moratorium could cost Louisiana thousands of jobs and millions of dollars in lost wages, further slamming Louisiana's already teetering economy. U.S. District Judge Martin Feldman will hear arguments today (Monday) on Hornbeck's request for a court order lifting the drilling ban. According to state estimates, Louisiana's oil industry employs about 58,000 workers, and its total of 260,000 oil-related jobs accounts for roughly 17 percent of jobs in the state - one of every six. According to a June 20 memorandum, the state will make a short appearance at the end of the hearing. The state filed its amicus brief on Sunday in support of the challenge to the moratorium. Attorney General James "Buddy" Caldwell, on behalf of Gov. Bobby Jindal, wrote that the "State of Louisiana encourages defendants to undertake a comprehensive analysis of what went wrong on the Deepwater Horizon oil rig in order to ensure the future safety" of offshore drilling. But the state claims the moratorium is overly broad and is not properly tailored to its stated goal. The Sierra Club, Florida Wildlife Federation, Defenders of Wildlife, Center for Biological Diversity, and the Natural Resources Defense Council joined the Interior Department as defendants. In a June 18 memorandum to the original petition, the defendants say Hornbeck's allegations are based on "speculative, calculable, and short-term economic injuries resulting from the moratorium." And the claim that Hornbeck has told its investors that the company will survive the moratorium with minimal economic losses. The June 18 memo claims that Hornbeck failed "to outweigh the harm to the government and the environment presented by allowing further improperly regulated and reviewed deepwater drilling operations to continue," and that public interest "clearly favors a continuation of the moratorium until the Administration concludes its review of the factors" that caused the April 20 Deepwater Horizon explosion and subsequent spill, and enacts regulatory and environmental safeguards to ensure that such a disaster never happens again. The defendants say the "Deepwater Horizon containment and recovery efforts are overtaxing the response capabilities that currently exist, resulting in a situation where there is no margin for error and no response capacity to spare." The defendants add that Hornbeck's allegations that the 33 operatives rigs whose operations have been suspended "had previously satisfied the rigors of the [Minerals Management Service] permitting process" is nonsense: "(W)hat has become painfully apparent since the Deepwater Horizon explosion is that MMS had almost entirely abdicated its regulatory responsibility to ensure that adequate oil spill response capabilities would be in place for deepwater drilling in the Gulf of Mexico." The defendants say the Minerals Management Service permitting process was not "rigorous," but is better described as a "blank check." Current estimates are that as much as 2.5 million gallons of oil are pouring into the Gulf every day from BP's broken wellhead. Plaquemines Parish President Billy Nungesser told CNN on June 11 that two safety improvements for offshore drilling rigs could "increase the safety by 900 percent" overnight. Nungesser told CNN's John King: "We know three nights before this explosion there were problems on the rig. People asked to be removed. I've been in the oilfield my whole life before I was elected parish president. Every time there has been a problem offshore, there has been a disagreement before the problem. ... We proposed to the president a 66-man plan: 33 men on and then 33 to crew-change every week. Retired engineers appointed by the president, a federal air marshal out there could stop the well at any time he saw a decision with safety. That alone would make the Gulf 100 percent safer tomorrow, not in 6 months. "Also, the device used in the UK, the half a million dollar device that would be a backup to the blowout preventer. Those are two things you can do tomorrow. Let them keep drilling and increase the safety 900 percent. But it's not as politically popular as placing a moratorium." A BP shareholder derivative complaint filed in May claims that the backup safety equipment to which Nungesser referred is required in other countries before an offshore drilling permit will be issued. BP did not equip its rig with the device because it isn't required by U.S. permit. The shareholders' complaint claims, "the BP defendants consciously elected not to install an acoustically activated remote-control shutoff valve, costing only $500,000, to the well. Indeed, such acoustic switches are mandated in countries like Brazil and Norway, and are routinely employed by companies such as Royal Dutch Shell and Total SA, but have not been legally required in the U.S. due to the lobbying efforts of the BP Defendants themselves as well as their counterparts at other companies. "Second, the BP defendants chose not to install a deep-water valve that would have been placed about 200 feet under the sea floor." The shareholder complaint claims that deep-water valves, like blowout preventers, are devices meant to seal leaks. Such a valve could have served as a cutoff of last resort to explosions. The shareholders said BP "ignored these precautions despite being well aware of the increased risk, from deep-sea drilling, of a failure of the primary blowout safety mechanism, the blowout preventer. The information was known to BP's safety, ethics and environment assurance committee, which took no steps to act on it." The shareholders cite a 2004 study by federal regulators that showed blowout preventers may not function in deepwater drilling environments because of the increased force needed to pinch and cut the stronger pipes necessary to drill at such depths. According to the study, only three of 14 rigs had blowout preventers able to squeeze off and cut the pipe at the water pressure present at the equipment's maximum depth. According to that report: "This grim snapshot illustrates the lack of preparedness in the industry to shear and seal a well with the last line of defense against a blowout," and yet no additional safety mechanisms that would assist in the case a blowout preventer failed were required under U.S. permit for offshore rigs."